The Economic Analysis Of Open Pit Cutoff Grade Optimization

The determination of cutoff grade in mining operation is an important decision-making problem. On one hand, it directly affects the profitability of a mine. On the other hand, it has great impact on the efficiency of mineral resource utilization of a whole nation. The determination of cutoff grade involves complicated analysis and calculations, and it has close relations with the knowledge of geology, mining, mineral processing, applied mathematics, economics and management. Although a lot of successful researches in this field have been done by many mineral engineering economists, there are still tremendous research opportunities exist at present. This dissertation focuses on the study of economic analysis and mathematical models of open pit cutoff grade optimization. The contents and research results of this dissertation are as follows.(l)The evolution of the theories and models of cutoff grade both in China and abroad is described, historical time period is determined according to their analytical method. The cutoff grade systems are discussed, and it proposes that China should change from dual cutoff grade system to a single one. The technological and economic factors relating to the cutoff grad analysis are studied, providing the basis for the inter-variable relations analysis in optimization modeling; (2)A deep examination of the structure of open pit cutoff grade optimization based marginal analysis, is made, so that we can have a thorough understanding of economic character and limits of this theory; (3)The mathematical model of open pit cutoff grade optimization based on the application of control theory is established. This model is enlightened by modern resource economics. The model is of higher grade in terms of mathematical structure. It also provides more information for mine decision makers; (4)In order to deal with the highly uncertain mineral product prices, the option pricing theory is introduced. A partial differential equation is constructed for the measuring of a mine's valueIVwith cutoff grade flexibility under the assumption of permanent mine life. A Mont Carlo simulation system is established for a mine with limited mine life and its product price following mean-reverting process. The results shows that the cutoff grade strategy under the guidance of option pricing theory can obtain more value for a mine; (5)The second best models of cutoff grade determination is studies. The model is suitable for the cases that grade distribution function is not available or the ore reserve is hard to estimate. This kind of models can be easily constructed. They are especially applicable for the economic analysis of the utilization of low-grade ores in China; (6)The macroeconomics of cutoff grade is discussed, and the ways of macro adjustment of mining behavior is analyzed.In each relevant part, the numerical case studies or practical applications are presented.Besides the above-mentioned discussions and mathematical model construction in each part, this dissertation also constructed a systematic logical framework that demonstrates the theory, methodology and models of the economic analysis of open pit cutoff grade optimization.